Metanor steps into the future

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2013-01-11

Make a wrong turn while driving along the streets of one of Canada’s great mining towns and you may feel you’ve gone through a portal into the past.

Just off of the bustling main drag of Val d’Or, an enclave of log homes that once housed workers at the historic Lamaque mine emerges. Homes kept tidy by the modern families living in them lie beneath the shadow of Lamaque’s still impressive head frame.

Driving out of town, the history lesson continues as the sister mine to Lamaque, the massive Sigma open pits, unfurls across the horizon.

Leaving a town with so much history is a fitting departure point for a site visit to Metanor Resources' (MTO-V) Bachelor Lake Mine — a mine whose own rich history plays a part in its present configuration.

The first shaft was sunk into the ground at Bachelor forty years ago, and since then the project hosted multiple openings, closings and, in a far more tragic vein, the death of three miners who drowned in an underground flood back in 2009.

With commercial production around the corner, however, Metanor is set to emerge from a past of starts and stops, to step into a future that could see it as a key player in this lesser known region that is a 2 hour drive northeast of Val d’Or.

“We’re humming along underneath the radar,” Metanor’s vice president and director Ron Perry says. “We never gave up. We just kept on going and now we’re getting ready to cross the chasm.”

Now that the mine is fully staffed and fully permitted, Metanor expects to achieve a steady state mill in mid-February. If it succeeds, Perry says the achievement will push the company into cash flow positive territory by the middle of that month.

Getting to this point, however, wouldn’t have happened had management not made a radical break from the historic view of how Bachelor should be mined.

This most recent incarnation of the mine is leaner and more modest, as management chose to steer clear of past mistakes that were encountered when previous owners tried to go big.

“You have to adjust the approach to the size of the mine,” Metanor’s chief geologist Alain Blais says. “You don’t try to make the mine fit the size of your dreams.”

When Sturgeon River Mines sank the first shaft here in the 1970s and its subsidiary Bachelor Lake Gold Mines (BLGM) deepened the shaft down to Level 12 in the 1980s, the idea was to get as much ore out of the ground as possible. Unfortunately, not enough of it was mineralized and that meant the operation didn’t last long.

Bachelor Lake Gold Mines managed to pull 869,432 tonnes out of the ground with a head grade of 4.66 grams per tonne for 130,341 oz. of gold before shuttering in 1989 — just a few years after it opened.

The main problem with the original mine was dilution, a problem compounded by the fact that mining was being done by a contractor who was paid by the tonne, killing any motivation to follow the mineralized zones closely.

“There was only one geologist at the site, the rest were contractors,” Perry says. “We’ve seen with our own eyes the mine widths they were using. It was out of order with the deposit. It was twice as wide as it should have been and dilution was over 100% in many places.”

“It’s a geologists mine,” Blais adds. “The geologist is the compass and he tells the miners where to go.”

So while today’s mill has the capacity of 1,200 tonnes per day, Metanor has scaled it back with a plan of milling at 800 tonnes per day instead.

“The key," Blais says, "is to find the right pace to mining. At the planned rate the exploration team will have four years to find more ore."

The long term goal is to get Bachelor going, generate cash and extend the life of mine 7 to 10 years at a steady pace, asserting both the asset and the company as a key player in the region.

Thus far, Metanor has been executing on its plan, though not with encountering some obstacles.

In November, the mine produced 1,715 oz. of gold, which beat the previous month’s total of 1,251 oz., and, since the end of July, Bachelor has been responsible for 6,157 oz of gold. Although the total was short of the company’s expectations, the causes for the lag — delays in permitting and a lack of labour — have now been resolved.

Metanor received its mining permits at the end of July last year and recently finished building a 625 metre escape-way passageway to the surface. The second passageway clears the last regulatory hurdle and allows it to move on to the next phase which is production activities in the stopes.

As for the labor situation, that was helped out by the closing of Richmont Mines (RIC-T) nearby Francoeur Mine.

“We’ve hired a dozen miners from Francoeur so now we are fully staffed and can catch up on those delays,” Perry says. “If we get to 500 to 600 tonnes per day in the first quarter we’ll be doing good, but we needed the faces to get there. The mill is not the bottleneck, the mill guys are saying bring us the ore, and now the underground guys are saying ‘we will bury you with it!’”

And while the rocks around Val d’Or have obviously been well explored over the year, surprisingly, the rocks here have not.

“This is like the Cadillac fault 100-years ago in the sense that there is little geological understanding,” Blais says. “We’ve barely started to scratch the surface here.”

So why hasn’t it been explored more?

Part of the reason is that Val d’Or possesses such mineral wealth that it has kept miners busy in other areas. Another factor is that historical claims in the Bachelor Lake region could be kept without any work being done on the broader area. That left much of the land unexplored.

And while that may be true of the broader region, at Bachelor Lake, specifically, Metanor has a good sense of what is going on.

The key feature on the property is a large intrusion known as the O’Brien pluton — a granite intrusion that is the source of gold mineralization in the surrounding rock.

The Bachelor Lake gold deposit can be either classified an orogenic lode gold deposit or an intrusion related gold deposit. The gold distribution appears to be controlled by both structural and lithological features with mineralization related to brittle deformational features, dilatational zones and brittle-ductile shear zones.

In layman’s terms what went on here is that the O’Brien intrusion came up through acidic volcanics where there were pre-existing areas of weakness in the form of fractures. Later stages of the process concentrated the gold as the heat and pressure pushed liquid away from the intrusion and through the fissures with the intruding pluton continuing to be the motor all of this geological activity.

The process repeated until there was an over-saturation in the fissures nearest to the pluton. At that point the hydraulic fluids were pushed out further and precipitated out away from the pluton. The process happened over and over again thus increasing the concentration of gold and forming the deposit.

That deposit is made up of three veins. The Main vein, Vein B and Vein A, which cuts both the Main and B. The A Vein is not mineralized the whole way through unlike the other two. Instead mineralization occurs where it touches the Main and B veins. Currently the main focus of Metanor’s excavation drills is the B Vein.

Metanor first arrived at Bachelor in 2005. The plan then was to explore the area while milling ore from its Barry open pit operation, which lies closer to Val d’Or.

While the mill turned for Barry ore for roughly two years, declining grades combined with trucking costs of $22 per tonne led to the shuttering of the pit.

“We were increasing capacity to balance out the declining grades but eventually you hit an inflection point and it just isn’t economic any more,” Perry explains.

Still, he says, Barry remains in the company’s field of vision.

The site currently has indicated resources of 7.7 million tonnes grading 1.25 grams gold for 309,500 oz. of gold and inferred resources stand at 10.4 million tonnes grading 1.41 grams gold for 471,950 oz.

Now the original plan has been reversed. Instead of cash flow from Barry ore funding exploration at Bachelor Lake, cash flow from Bachelor Lake will fund the development of Barry.

“We need to drill off another 200,000 oz. at Barry. That would take us over the one million oz. mark, and we could look at doing a financing and maybe put a concentrator or a small mill at the site,” he explains.

As for development and exploration at Bachelor given that the funds from Barry didn’t materialize as expected, Metanor showed its resilience and resourcefulness in dealing with the situation.

The company struck a deal with gold streaming company Sandstorm Gold (SSL-V) that saw Sandstorm give Metanor US$20 million in cash in exchange for 20% of the life of mine production at Bachelor Lake at a price of US$500 per oz.

Those funds helped fund both mine development and exploration.

And while Metanor is focused on the final steps towards achieving commercial production, it isn’t neglecting its exploration program.

After aggressive drilling in the mineralized area over last spring and summer, going forward the exploration to-do list includes plans to extend mineralization at the existing mine at depth, further exploration of the Hewfran claims to the west of Bachelor Lake, where there are already indicated resources of 110,100 tonnes grading 6.47 grams and inferred resources of 206,900 tonnes grading 5.66 grams gold for 60,556 oz. of gold. Recent drill results from Hewfran included highlights of 7.89 metres grading 10.3 grams gold and 10.11 metres grading 6.92 grams.

After that the plan is to go north and south of Bachelor to drill test surface showings.

And then there is the O’Brien granite itself, which may host a low grad high tonnage deposit in the future. Past drill results on the pluton have returned roughly 2 grams over 2 metres, which leads Perry to opine that there could be block caving potential.

Perry becomes noticeably enthusiastic about the prospect. It’s an enthusiasm that is shared by Blais and all the workers spoken to at the mine. Part of the reason for such enthusiasm is a strong motivational system that posts underground mining team’s results with corresponding financial rewards on a wall in the miner’s locker room.

And part of that enthusiasm comes from a team realizing that it is stepping out of a mine’s checkered past and into a hopeful future.

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